×
Рус Eng
Рус Eng
Calculate the cost
of opening a company
Contacts
Write to WhatsApp

Property taxes in the UAE

Property taxes in the UAE - Makebiz

The United Arab Emirates attracts many investors due to its high standard of living, favorable tax climate and rapidly developing real estate market. However, as in any other country, there are certain tax obligations that must be taken into account when selling properties. In this article, we will take a detailed look at property taxes in the UAE and provide a checklist for owners to avoid penalties.

The Emirates does not charge personal income tax, which makes the country attractive for highly paid professionals and investors. This means that all income earned from employment or investments is tax-free, which significantly increases net income. We are also pleased with the absence of a capital gains tax, which allows investors to freely dispose of their property without additional costs when selling objects. In addition, there is no annual tax on the ownership of the property, which significantly reduces the financial burden on the owners.

Differences for residential and commercial premises

If you own a residential apartment in the UAE and rent it out on a long-term basis, you don’t have to worry about value added tax. The situation is changing when it comes to commercial facilities such as offices, shops and warehouses.

These assets are treated as business objects and are subject to a 5% VAT. However, it is worth remembering that it is possible to refund part of the tax paid. 

Investors can refund VAT for the following types of expenses by filling out the appropriate form:

1. The work and services of agents, as well as lawyers who accompany you in the purchase or rental processes.

2. Capital expenditures, i.e. the costs of fit-out, repairs and construction.

3. Some operating expenses related to tenants.

Among other things, owners who rent out commercial real estate should monitor their income. If they exceed a certain threshold, they are required to register with the Federal Tax Service (FTA). If the amount of taxable transactions in the last 12 months reaches 375,000 AED, the owner is required to register. The threshold for voluntary registration is 187,500 AED. This is necessary to keep correct records and pay VAT.

Failure to comply with registration requirements can lead to serious consequences. For example, a fine of 10,000 AED is provided for late registration. In addition, fines may be imposed for failure to file declarations and penalties for late payment of taxes. This may create additional difficulties when selling or re-registering an object, which should also be taken into account when doing business.

Corporate tax

This type of taxation applies to individuals who own real estate in the UAE only if their business is registered as a licensed business. For example, if you are engaged in system development activities and have the appropriate license, you will have to pay corporate tax. However, the Emirates offers several Designated Free Zones where special tax rules apply. In some cases, transactions may be exempt from VAT and corporate taxes, which makes such zones especially attractive to investors.

Obligations during the sale 

1) Consider the situation with VAT:

— Sale of a residential property on the secondary market, as well as the first sale of housing by a developer — the tax does not apply.

   — Sale of commercial premises — 5% tax.

2) There is a concept of Transfer Fee, when a transaction registration fee is also charged during the sale. This amount varies from 2% to 4%, depending on the emirate and the terms of the deal. For example, in Dubai the rate is 4%, and in Abu Dhabi it is 2%.

How to avoid fines: an action strategy

1. Determine the type of property: make sure that you know for sure whether your property belongs to residential (housing) or commercial (commercial) type. This is crucial for the proper application of tax obligations.

2. If you are engaged in commercial activities, you should consider income under the Ejari system. If your annual income exceeds 375,000 AED, you will need to register with the VAT payment system.

3. Be sure to keep all contracts, invoices, and expense documents. This will help you to confirm your expenses and, if necessary, justify your tax obligations.

4. If you own a commercial property, do not forget about the right to a VAT refund. This can significantly reduce your costs.

5. Make sure that you file your VAT returns on time. Delay may result in fines and additional costs.

6. When selling commercial real estate, do not forget to charge 5% VAT on the value of the property.

7. Make sure that your premises do not fall into the Designated Zone category, as special tax rules may apply to them.

8. If you plan to engage in real estate development or short-term rentals, be sure to obtain the necessary licenses. Without them, your activity may be considered illegal.

Investing in real estate in the UAE is considered an extremely profitable and profitable endeavor, but it is important to carefully study all tax aspects together with legal consultants. Understanding all the nuances and complying with all the requirements will help avoid fines and ensure successful real estate management. Sign up for a free consultation with a Makebiz lawyer and learn more about how to start investing in Dubai and what needs to be considered.

Read other articles on this topic:

Back

BUSINESS SERVICES
SERVICES FOR INDIVIDUALS
INFORMATION COOPERATION
Copyright © Makebiz. All rights reserved.
Privacy Policy
Calculate the cost of opening a company in the UAE

The website processes personal data using cookies in accordance with the Terms and Conditions for the Processing of Personal Data. You can disable cookies in your browser settings.

Ок